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Bad Economics Is Driving Out Good Science

January 8, 2015 by Tony Noerpel filed under Columns, Sustainable Planet No Comments

“The key to understanding [economics] lies in identifying the positive feedbacks and instabilities that lead to fast and surprising changes. These positive feedbacks are the most important elements in all markets; they’re not exceptional in the least. I’ll also argue that it would be utterly astounding for it to be otherwise, for instabilities, driven by positive feedbacks affect almost everything in the universe, from stellar supernovae to planetary ecosystems and our climate to the movement of the earth’s crust, and from the flow of electronic traffic through the Internet to the growth of cities.” Mark Buchanan [1]

A few years ago I introduced readers to the logical theorem ex falso quodlibet or from a false proposition, anything follows. If a logical system begins with a false axiom or assumption then no matter how robust the logic the conclusions can only be correct by pure chance; indeed any nonsense can be proved by starting with a false assumption [2]. Milton Friedman adopted this strategy to develop his neo-liberal economics by starting, in his own words [3], with “assumptions that are wildly inaccurate descriptive representations of reality.” Nobody should be surprised that denial of human-caused climate change is also based on bad assumptions.

The forest ecologist Daniel Botkin wrote (and testified to Congress earlier this year) that [4]: “… One can only be rather agnostic about the role that human actions have played and are playing in climate change. A new, important paper in the journal Science casts some fascinating light on the question of whether carbon dioxide change precedes temperature change, and therefore is a likely cause of the temperature change, or whether temperature change precedes carbon dioxide change, casting doubt on the role of the greenhouse gas in climate change.”

A skeptic recognizes the flawed “either/or” assumption in Botkin’s thinking; either atmospheric concentrations of carbon dioxide change the surface temperature or the surface temperature changes atmospheric carbon dioxide concentrations. One need not have any knowledge of climate physics to ask why both assertions cannot be true or indeed even false. What is the physics that might preclude one given the other? Botkin’s argument is equivalent to assuming that either the grass is green or the sky is blue but not both. It is possible Botkin didn’t read the Science paper he cites because those authors disagree with him.

Warming the surface of any planet like the Earth, over millennial or shorter time periods, often causes carbon to accumulate in the atmosphere from various surface reservoirs such as the oceans, soils and the biosphere. Cooling the surface often causes a net flow of carbon in the other direction. This fact is empirically demonstrated in Antarctic ice cores [5]. Further, experimental and observational evidence proves beyond doubt that carbon dioxide is a greenhouse gas. Thus a positive or amplifying feedback process exists; increase the surface temperature and the level of carbon dioxide in the atmosphere increases which causes an increase in the surface temperature increasing the carbon dioxide in the atmosphere further and so on until the system achieves a new equilibrium.

That positive feedbacks exist in the climate system is introduced in the second chapter of the text Physics of Climate by Jose Peixoto and Abraham Oort and they include many examples [6]. Consensus busting geniuses would do well to read this book first before they continue making stuff up. The mathematics of feedback is familiar to every engineer and scientist including every forest ecologist [7].

So where does Botkin’s false assumption, and it is a popular denier assumption, come from? I did a quick internet search and found this on Joan Nova’s web site: “The bottom line is that rising temperatures cause carbon levels to rise. Carbon may still influence temperatures, but these ice cores are neutral on that. If both factors caused each other to rise significantly, positive feedback would become exponential. We’d see a runaway greenhouse effect. It hasn’t happened. Some other factor is more important than carbon dioxide, or carbon’s role is minor.” According to her web site, Nova is not a scientist but an amateur economist. We should not be surprised to learn that her misunderstanding of positive feedback is not influenced by science but by bad economics.

Eugene Fama won the Economics Nobel in 2014 based on his efficient market hypothesis. In order for markets to operate efficiently without regulation or government intervention requires that positive feedbacks not exist. The physicist Mark Buchanan describes this flaw in his book Forecast [1]. Positive feedbacks do exist in the economic system and caused the Great Contraction of 2008 as well as the Great Crash of 1927 and the Great Depression and therefore Fama’s hypothesis is false or at least needs work. In fact excluding the effects of various positive feedbacks in their models, is why economists failed to forecast the contraction. Buchanan writes:

“The most spectacular rise in housing prices in half a century may have spurred a frenzy of borrowing and speculative gambling, ending with a crash back to reality and a massive government bailout to preserve the entire financial system, but to Fama, the bubble actually had nothing to do with it. Bubble? What bubble? As he exclaimed, ‘I don’t even know what a bubble means. These words have become popular. I don’t think any have any meaning… They have to be predictable phenomena. I don’t think any of this was particularly predictable.’”

Apparently bubbles do not exist because Fama’s hypothesis cannot predict them. To paraphrase Bertrand Russell, this is a view so absurd that only very learned men could possibly adopt it. Botkin, Nova and Fama apparently do not understand dynamical systems and feedback phenomena. There are at least three reasons why positive feedbacks do not generally lead to runaway effects in systems like the economy or the climate. First, so long as the feedback factor is less than one the system will simply evolve to a new relatively stable state such as what has been happening with the climate system during the Pleistocene and the Holocene swinging wildly from glacial to interglacial states. Second, there are often negative feedbacks which eventually help to stabilize the system. Third, the strength of the feedback is usually dependent on the system state so that as the system evolves the feedback may become less positive.

Instead of using bad economics to replace good science, these consensus busting geniuses should be applying the lessons from good climate physics to fix bad economics.

[1] Mark Buchanan, Forecast, what physics, meteorology and the natural sciences can teach us about economics, Bloomsbury, 2013.

[2] see: http://www.answers.com/topic/ex-falso-quodlibet#ixzz2KabZcsbe and http://en.wikipedia.org/wiki/Principle_of_explosion

[3] Tony Noerpel, The Con in Economics, Blue Ridge Leader, March 5, 2013, http://brleader.com/?p=10734 see specifically: Milton Friedman, The Methodology of Positive Economics, in Essays in Positive Economics, Chicago: University of Chicago Press, 1953, pp. 3-43.

[4] Tony Noerpel, State of Sophistry, September 25, 2014, http://brleader.com/?p=15367

[5] Jinho Ahn & Edward J. Brook, Siple Dome ice reveals two modes of millennial CO2 change during the last ice age, 29 Apr 2014, DOI: 10.1038/ncomms4723

[6] Peixoto, J., Oort, A., Physics of Climate, Springer, 1992. See also Tony Noerpel, Missing mysterious negative feedback, July 20, 2010, http://www.brleader.com/news/images/Mysterious%20negative%20feedback.pdf

[7] see for example David Beerling, The Emerald Planet, How plants changed Earth’s history, pp 190-191 and Plate 16, Oxford University Press, 2007.

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